Fintech is talked about as one of the most exciting segments of technological disruption right now, but after the implosion of so-called UK unicorn Powa Technologies, and trouble at high profile US online lenders Lending Club and Prosper, there’s been something of a sobering in the space. While those examples all face particular issues, they are also a reminder of the huge challenges facing companies trying to disrupt this industry.

On a panel at The Europas in London this week, TechCrunch’s Mike Butcher asked the co-founder and CEO of venture capital firm Mangrove Capital Partners, Mark Tluszcz, about a piece he wrote in the Financial Times called ‘Investors should ignore the hype about fintech’. Tluszcz said that looking at the evolution of the industry, there was “no question” London is the number one place to be if you’re building a fintech startup. However he says that hype risks overshadowing other exits in the city and that “fintech has delivered more hype than returns” so far.

He argued that while there has been promising innovation around specific verticals in finance, there hasn’t been a single business that turned the industry on its head in the style of Uber, Skype (in which Mangrove was an early investor) or WhatsApp in their respective fields.

“I am not a sceptic, I have just not yet found company that is truly disruptive,” said Tluszcz, speaking at the annual conference. “In today’s current crop there are a lot of great businesses but there is not one great disruptor.

“Investors are financing sub-sets of finance like transferring and lending. They are all great businesses but in isolation they become medium-sized, not transformational. The question remains – can fintech companies turn into big large scale businesses?”

Valuation games

TransferWise is one of the companies whose rapid growth over the past few years has helped drive hype around the London fintech scene in particular. Its co-founder Taavet Hinrikus, speaking on the same panel, pointed to the challenge a new brand faces when it tries to break into the tightly-knit world of finance and convince customers to start trusting its service over a brand they are familiar with. For now, at least, the disruption of finance by technology is happening by sector.

“Finance is a notoriously hard industry,” said Hinrikus. “You have to think about how to build your brand and trust over the long term. It’s not for the faint hearted.”

“When you look at the fundamentals of our cost base compared to banks and the speed at which we can move we are building something that is cheaper and faster but that is also much easier to use. We have more than 5% market share in the UK and however good your marketing is, ultimately it is useless with a s*** product.”

TransferWise is also a fintech unicorn, meaning that it is valued at USD1 billion – a figure that was seized on with maniacal fervour by many in the tech world as a benchmark for success over the past few years. Hinrikus is notable for having always shied away from talks about valuations and price tags and when asked whether that kind of thing is important to him his response was just: “No.”

Speaking on the panel Tluszcz echoed a warning that is now gaining momentum across the industry: that aiming for a billion-dollar valuation is the wrong target when building a company, distracting entrepreneurs from the long term goal.

“Hailing unicorns and billion dollar valuations is like celebrating winning FA cup before playing the final,” says Tluszcz. “You want to build a company you sell or take public.”

Speaking on the same panel was Passion Capital partner and the UK government’s special envoy for fintech Eileen Burbidge. She countered, however, that it is worth acknowledging that companies taking on segments of banking like money transfer, remittance and lending are gaining momentum and taking a piece of the pie once dominated by banks and traditional financial institutions.

“It is worth celebrating getting into the competition in the first place,” said Burbidge. “A couple of years ago you could not compete with Barclays – now these companies are becoming a real threat.”

Companies like TransferWise, while transforming the consumer experience and delivery of financial services are not rebuilding the entire system as they still run on traditional banking rails. Burbidge said 40% of Passion’s portfolio is fintech companies and until now they had been focusing on the delivery of services, fraud, ID, security and with a lot of KYC and AML to come. However she points to the firm’s investment in challenger bank Mondo as a new category of businesses “fundamentally changing the banking stack.”

I caught up with Guillaume Andre, Head of Marketing, Ingenico Northern Europe, to discuss the implications of a tech giant-payments provider collaboration-led future, and how Ingenico and Google might continue to innovate the POS system in the future.

The future is even closer than we think. The increasing pace of technological change means concepts formerly considered only abstract theories on a distant horizon are already nearly upon us. By Urs Gubser, Head E-Commerce, SIX Payment Services.